Sources of public funding and finance

Milton Keynes has a successful programme of major urban extensions totalling over 15,000 homes, building on its legacy as the UK’s largest post-war New Town. This approach to growth has been supported by a key finance mechanism known as the Milton Keynes tariff introduced in 2007 – a standardised S106 mechanism which the authority has turned into a revolving fund and borrowed against to enable the forward funding of infrastructure in collaboration with the Treasury. With so much growth in the area and so many receipts for the fund, this has been particularly effective, and has acted as a precursor to the Community Infrastructure Levy. However, it has been dependent on consensus by site promoters that this offered value for money, as well as extensive land ownership under Homes England predecessor English Partnerships.  

Brooklands Urban Extension in Milton Keynes delivered extensive green infrastructure based on the MK Tariff system – Image credit: TCPA

The National Housing Delivery Fund (NHDF) provides capital grant funding for infrastructure and land to support housing delivery. The government has stated that “The NHDF will reform the housebuilding system to achieve a permanently higher supply of good-quality homes by providing £5 billion of capital grant funding for infrastructure and land from 2026 to 2030.” Including £1.9bn already devolved to Established Mayoral Strategic Authorities Homes England will administer the core NHDF and provide grant funding to projects that will deliver its objectives, while some established Combined Authorities will have funding devolved to them, meaning that authorities would need to work with their CA to secure funding. Potential projects can be discussed with Homes England regional contacts and there are no set bidding windows for the programme. Across both the bank and the fund, Homes England will aim to support 1 in 7 of the 1.5m homes target to 2029. The fund is designed to maximise impact meaning that bidding is competitive. The focus, as with previous rounds of funding (many of which are wrapped into this new programme) will be on areas above the median affordability ratio for house prices, but a range of factors will be considered in making awards, including compatibility with Homes England Frameworks such as Building for Healthy Life, Healthy Homes and Streets for Healthy Life, as well as net additionality of homes and delivery rates. 

Guidance on the emerging National Housing Delivery Fund is available here.

The Social and Affordable Homes Programme (SAHP) is a national investment initiative supporting the capital costs of developing affordable housing across the UK. Backed by up to £39 billion over a decade, it aims to deliver hundreds of thousands of new homes. At least 60% of these properties are designated for social rent. 

Mayoral Combined Authorities are already receiving over £750m of brownfield funding which is administered by Homes England. Please get in touch with your local Combined/Mayoral Strategic Authority for more information. 

The National Housing Bank is a new government public finance institution with the ambition to accelerate the delivery of new homes and communities, whilst also enabling the regeneration of towns and cities across England. It will provide £16bn worth of debt finance, equity and guarantees to the house building and public sectors to enable schemes to get off the ground. Given that large scale new settlements often have high up-front infrastructure costs that can only eventually be paid off through later land receipts, the National Housing Bank offers significant potential to provide revolving funds to those bodies delivering such schemes, helping to overcome the challenges associated with securing this in the private market. However at this stage there is limited clarity on how the bank will prioritise investments geographically, or in terms of types of projects or levels of risk. Homes England’s Investment Prospectus states the bank will ‘offer products at different risk and return thresholds to ensure that they are suitable for all stages of development’ and will ‘explore new debt structures that blend public and private capital’²⁰. Early engagement with Homes England who administer the National Housing Bank is advised, and the bank’s prospectus sets out the conditions and principles for funding success, including strategic aims, expected rates of return, and value for money criteria. Currently the bank offers seven core products, including for SMEs, 25 year loans to registered providers, 15 year infrastructure loans to master developers, as well as a range of other areas.  

For regeneration focused projects, rather than more traditional, primarily greenfield sites, the ECF is a partnership between Homes England, the government’s new homes accelerator, Legal & General investments and the nationwide placemaker, Muse. They come together to unlock urban potential, delivering area-wide and long-term regeneration projects which create meaningful change for communities. Since 2001, it has delivered some of the country’s most complex and successful new places in cities including Liverpool, London, Plymouth and Salford. They transform underused urban sites into genuine new communities.  

National Wealth Fund is a public finance institution created in October 2024 when the UK Infrastructure Bank became the National Wealth Fund. The fund has up to £27.8 billion of public capital announced for deployment through equity, loans, guarantees and local-authority lending, with the objective of “crowding in” larger volumes of private investment. Its aim is to mobilise private capital for clean energy and industrial transformation, and to support long-term regional growth. It is sponsored by HM Treasury and operates at arm’s length under a Statement of Strategic Priorities for the 2024 to 2029 Parliament. The fund can support regionally significant projects by offering low cost, flexible lending directly to local government at gilts + 40 bps. They also offer strategic partnerships, project advisory support and a local government knowledge service to share expertise in key sectors, project development and bespoke finance and delivery mechanisms. 

The statutory framework for local authority borrowing and investments is set out in the Local government Act 2003, which allows local authorities to borrow at preferential rates through the Public Works Loans Board. Local authorities may borrow money or invest (a) for any purpose relevant to its functions under any enactment, or (b) for the purposes of prudent management of its financial affairs. Regulations require a local authority to have regard to the Prudential Code for Capital Finance in Local Authorities (the Prudential Code) published by the Chartered Institute of Public Finance and Accountancy. When a local authority is deciding whether to borrow funds to deliver a new Garden City, they will need to develop a robust business case which demonstrates that the requirements of the Prudential Code have been met. A 2023 survey of 159 local authorities in England found that 36% of local authorities are using Public Works Loans Board funding to directly deliver housing, demonstrating the widespread use of this funding, although many such projects are small in scale. 

Where schemes have a significant employment element or will enable wider employment growth in the area, consideration should be given to agreeing an area specific business rates retention scheme with Government, for example through an enterprise zone. This would enable a local authority to retain (and even borrow against) any future uplift in business rates resulting from a scheme’s delivery, as well as a temporary discount to occupiers. 

Homes England Strategic Place Partnerships (SPPs) are long-term, collaborative agreements between the agency and local authorities (often combined authorities) to accelerate housing delivery, regeneration, and infrastructure development. By combining local knowledge with Homes England’s funding and expertise, these partnerships aim to create sustainable, high-quality, and affordable homes and places. Homes England plays an important role in the land market, for example by taking on sites the market will not invest in for a variety of reasons, such as the high cost of remediation or complex ownership issues. It also assembles smaller sites into larger, more strategic opportunities and then disposes of them to the market in a form which is more viable for investment. Engagement with Homes England, particularly at a political level, can help to unlock these efforts. 

The Government’s Garden Communities programme continues to actively support local authorities through skills and capacity funding. The New Homes Accelerator is a collaboration between the government, Homes England, local authorities, developers and other key stakeholders. It aims to unblock and accelerate the delivery of housing developments that have for various reasons become delayed, or which are not progressing as quickly as they could be.

Please get in touch with your Homes England contacts for more information. 

The purpose of developer contributions is not land value capture, but to mitigate the impacts of development, as set out in regulation 122 of the Community Infrastructure Regulations 2010 (as amended by the 2011 and 2019 Regulations) and as policy tests in the National Planning Policy Framework. This mechanism can be used to secure infrastructure and other works and provisions that are funded from the uplift in land value which comes from the grant of planning permission. However, S106 agreements are bilateral between a planning authority and a single developer, and are rarely, on their own, sufficiently sophisticated to account for the multiparty agreements required to deliver a new Garden City. For example, achieving an equalisation of land values through S106 payments alone could be challenging. Still, S106 payments are a key tool to secure the sustainable delivery and placemaking of all new Garden Cities. 

The Community Infrastructure Levy (CIL) is a planning charge that local authorities in England and Wales can place on new development to fund essential local infrastructure, such as schools, transport improvements, and health services. In theory, CIL could be used to fund aspects of new Garden City delivery where these are a council priority.